The World Trade Organization (WTO) Agreement is a comprehensive document that outlines the rules and principles governing international trade. One of the critical areas covered under the agreement is the rules of origin, which specify the criteria for determining the country of origin of goods. The rules of origin are essential as they affect the applicability of trade measures such as tariffs, quotas, and preferential treatments. This article aims to explore the different types of rules of origin defined in the WTO agreement.
First, there are the wholly obtained rules of origin. These rules apply to goods that are entirely produced or manufactured within a particular country. For instance, fruits and vegetables grown in a country would be considered wholly obtained products. The wholly obtained rule of origin is straightforward to apply since it is easy to determine whether a product is wholly obtained or not.
Secondly, there are the sufficiently worked or processed rules of origin. These rules apply to products that have undergone a certain amount of processing or value addition in a particular country. The amount of processing required varies depending on the product and the agreement. For instance, in the North American Free Trade Agreement (NAFTA), goods must satisfy the regional value content (RVC) test, which requires a minimum of 60% regional value content to qualify for preferential treatment. The sufficiently worked or processed rule of origin is more complex than the wholly obtained rule of origin, as it requires an assessment of the production process and value added.
Thirdly, there are the change of tariff classification (CTC) rules of origin. These rules apply to products that have undergone a change in their tariff classification after importation into a particular country. The CTC rule of origin is used to prevent countries from importing products from third countries, making minor modifications, and re-exporting them as their own. For instance, if a product is imported as a fabric and re-exported as clothing, the clothing would be deemed to have originated from the country of importation.
Lastly, there are the specific process rules of origin. These rules apply to products that have undergone a particular manufacturing process in a particular country. The specific process rule of origin is used to determine whether a product has undergone a process that adds substantial value or transforms it into a new product. For instance, the specific process rule of origin would be applied to a product that has undergone a chemical process that alters its chemical composition, resulting in a different product.
In conclusion, the rules of origin defined in the WTO agreement are crucial in determining the origin of goods, which subsequently affects the application of trade measures such as tariffs, quotas, and preferential treatments. The types of rules of origin vary depending on the degree of processing, value addition, or production process undergone to produce the product. As a professional, it is essential to understand the rules of origin to generate relevant content for businesses engaged in international trade.